Uneven Integrity

Fed Chairman Ben Bernanke has been desperate to find the linguistics to encode his self-imposed integrity paradox. This week, he referred to the “frustratingly slow” and “uneven” recovery. Thank heavens he’s not a doctor. “You may walk with a limp,” he would advise a patient prior to bilateral amputation of both legs. “Your feet will not recover as quickly as the rest of your body.” Really? When the evidence is overwhelmingly against the much heralded repair of the carnage of the debt fueled spending frenzy of the past decade, one has to wonder why, prior to the election cycle, he finds it impossible to tell the truth. The Chinese SAFE reports at the beginning of the week – so damning that the government had to censor their own transparency by removing public comments on U.S. economic instability from their own websites setting a new standard for censorship – leave no doubt that the market for more U.S. debt has soured beyond already abysmal standards.


In a ‘shocking’ and ‘unexpected’ turn of events, equities ended the week at a low that wiped over $1 trillion in market value away in 6 weeks – the longest slump since October of 2002. The financial media concluded the day on Friday with a record number of “weaker than expected” and “less than estimated” hyperbolic descriptors of the events of the past 6 weeks. Blackrock’s Bob Doll was quoted in Bloomberg saying, “We’re at the end of the recovery and the beginning of the expansion.” And, the casual reader may carelessly overlook the fact that his enthusiasm has more to do with Blackrock’s international exposure – including their massive Asian market interest – than reflecting bullishness on the U.S. economy.

I’ve frequently commented on the fact that sound-bite information is, in fact, misinformation. If a comment is taken out of context or, worse yet, presented without context, it may contain literal ‘truth’ without being contextually true. Most bank executives have basked in the comfort of this defense when they perjured themselves in Congress by ‘truthfully’ answering questions all the while knowing that they were hiding behind the error in the inquiry.

Visa and MasterCard both were appalled that Congress wouldn’t delay the imposition of new fee limits on charges to debit card transactions. In May, the Republican controlled House Agriculture Committee – yes, you read this correctly – AGRICULTURE – voted to delay implementation of transparency and regulation of credit default swaps. For those of you who aren’t familiar with CDS, you would be pleased to know that these traded bets against organizations meeting their financial commitments have ballooned to over $600 TRILLION – over 10 times the inflation-adjusted world’s GDP. To be abundantly clear, in addition to nonsensical deferrals of accountability like the Federal Reserve and U.S. Treasury Ponzi scheme – sorry, I mean Quantitative Easing or QE2 – the ‘recovery’ which has been so illusive is a hologram created by illegal and illusory utilities. And, the deferred enactment of regulation on CDS has been cued perfectly for the electoral calendar. You see, just before the Presidential elections, the Agriculture Committee, supported by the House Financial Services Committee - has set the CDS device to detonate just before the election.

To be clear, financial institutions like Bank of America, JP Morgan Chase, Goldman Sachs and Citigroup – all beneficiaries of the largesse of government bailouts and other concessions have achieved significant profitability arranging CDS trades. An estimated $55 billion in annual revenue is generated from these products and, without these bets and the speculation around the bets (yes, I know, this could seem confusing but this is what the recovery has been all based on, so you’ve all been drinking this illogical cool-aid), we wouldn’t have a recovery.

If you take one step back from the pathologic lying that passes itself off as news and analysis, you may be wondering why detonating another market melt-down on the eve of the next election would make sense. Apart from the obvious response seen in the Bush Administration’s eleventh hour ‘intervention’ which pumped billions of dollars into financial interests and the automotive industry as massive bonuses for aiding and abetting his 8 years of post-9-11 fiscal distractions, there is a more intriguing thesis that could be explored.

Over the past two weeks, the Department of Defense has decided to socialize a theme that I discussed years ago – namely, the growth of ‘cyber-threats’ against the U.S. Now, what follows is merely my musings around why one may want the CDS implosion and the DoD’s cyber threat marketing to be introduced at the beginning of the Presidential campaign season. CDS exist in digital form. They are private transactions and, courtesy of the Agriculture Committee’s crack oversight (please read the disdain-filled sarcasm) they have no regulation to speak of. As of this week, the U.S. and Europe are on track to break the all-time record for financial institution security breaches (at least the ones that are reported). Bear in mind that just at the end of this week, the IMF was reportedly ‘hacked’. Is this news or is it socializing a concept to make the actual event more plausible? Just a question.

So wouldn’t it be convenient if, long about September of next year, on the verge of a complete collapse of the government’s giant CDS – Ponzi racket, for a cyber attack to wipe out the records of CDS obligations? Rather than facing the messiness of the Greek bankruptcy predicament, a simple electromagnetic pulse (and EMP blamed on a hostile source) could wipe out all the records just in time for all of them to be on a single clearinghouse. If you could add Treasury records on the same platform, we could actually ERASE our financial obligations and, voila, get a fresh start. Best of all, we could blame the cyber attack on, say China or Iran, and get ourselves a whole new economic stimulus in the form of another war. The Department of Defense RF and EMP hardening budgets wouldn’t have anything to do with this scenario, would they? And best of all, in May and June of 2011, we could have been told the ‘truth’ of the plan and, as a society, ignored it.

Now, I’m not suggesting that this Dan Brown-style conspiracy could ever happen. Obviously our leadership wouldn’t be that nefarious. Obviously, somebody with integrity would insure that such a cataclysm of conscience wouldn’t actually happen. Nobody would seriously consider aggregating opaque financial obligations in a single place and then create a terrorist event to justify equally opaque wealth transfer. Right?

We, the People, need to stop hiding behind the complexity of synthetic financial products dismissing them as ‘too difficult to understand’. There’s been no recovery. There’s no plan in place to actually address our systemic problems. And chronic economist oracular failure is not due to complexity. It’s due to the fact that the court astrologers are being promoted to continue to sell the illusion. PIMCO’s Bill Gross has had the decency to try to set off the alarm surrounding the Treasury delusion and, for his recent activism, InvertedAlchemy applauds his efforts. Let’s hope that a few others decide to follow his lead and, together, we may avert a much larger crisis. Be informed. Put the puzzle together. It’s not hard – just sobering!

Looking for Hay in a Needle Stack

“Economists had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May,” reported CNBC and all the other media outlets as they once again struck the familiar refrain on the ‘unexpected’ anemic jobs report at the end of the week. These, remember, are the same economists who have been telling us we’re in a recovery; that the markets are coming back; and, that our economic woes are the product of a real estate crisis.

Nothing, save political melancholy delusions, could justify the expectations that were off by over 100,000 jobs in May. And the degree to which we’re still reporting and responding to data that we: a) know is manipulated and incorrect; and, b) is not predictive of any modern market dynamic (same predictable political pandering) is staggering. I was grateful to Mary Engle at MSN Money who had the decency of reporting the 16.6% (or greater) actual unemployment statistics when one counts those who are chronically without gainful employment.

As I made the rounds in D.C. this past week – visits with industry lobbyists and Congressional representatives – I was intrigued by the degree to which we find ourselves uniformly beyond the edge of utility with the navigational tools which have aided our captains in wrecking our economy’s prospects. Yet we’re still incapable of cutting ourselves free from these albatrosses (or albatrossi) and re-examining fundamentals. In a rather poignant moment with a free-market conservative freshman member of Congress, I was explaining the need for Congress to consider solutions to economic challenges from the private sector that would require NO NEW legislation and NO NEW appropriations. In fact, what we were discussing simply requires enabling laws that have been around since the Lincoln Administration. Confronted with a call for transparent application of existing law, the member placed his hand on his forehead and said, “I guess I’m not sure what you’re asking me to do.”

Moments earlier, in the same Congressional office, a lobbyist was briefing staff on ‘key issues’ that were relevant to the member’s District. “You know, we can really be helpful in keeping the Congressman’s staff informed,” she gushed. When asked to provide input on said matters, she rattled off a list of her lobbyist colleagues who could help as her area of expertise was health care but she had colleagues in a number of other disciplines. “Just let us know what you need information about and we’ll supply you with experts,” she generously offered.

The Court of Appeals has a wonderful term – the willful practice of ignorance. This term is applied to people who, knowing that there could be information that is material to their concerns, elect to move forward without any due effort to inform themselves. On Capitol Hill, this principle extends to listening to those who have evidenced a detachment from reality in the past who persist in purveying their nonsensical views.

As we move into an acrimonious election cycle and we see the sabers sharpened on the whetstone of consensus ignorance, I wonder what it will take for us to start applying some performance discernment to the voices we elect to consume. Medicare and Medicaid, pensions, municipal bonds, public sector employment, and the dollar are all among the institutions which will NOT pass unaltered in the coming weeks and months. China’s inevitable re-marking of the value of Treasuries – something that they’ve already broadcast in their recent ‘hospitality’ afforded to the Treasury Secretary and the Federal Reserve Chairman – is not a forecast but a certainty. Realizing that China and other sovereign funds will be necessary clients in the future, S&P and Moody’s are making trifling negative statements about the U.S. economic situation realizing that to do any less would guarantee them status as relics next to other paleontology exhibitions of those who could not evolve when the climate changed.

It’s not that the models don’t work. It’s not that the metrics are inaccurate. No, it’s that the consciousness that decided what to model and what to measure is at its terminus and we’re now at the natural consequence of the line to which we sought a regression of our standard of living and our hegemonic self-perceptions. Now, the outlier is the new metric and the aggregation of perturbations is the new model. We’re not looking for the one variable that will fix the ‘old’ models but we require focus with new lenses on new variables. There’s no needle in the haystack that will save us. We are ready to go back to our roots and reassemble ourselves around productivity and accountability. And that voice, my friends, is truly rare!

Full Faith and Confidence

“Leadership is the capacity to inspire and motivate; to persuade people willingly to endure hardships, usually prolonged, and incur dangers, usually acute, that if left to themselves they would do their utmost to avoid.”

Sir Michael Howard

Over the past six months, I have been witness to a great crisis of leadership. Senior leaders of resource endowed countries and industrialized countries alike, when presented with incontrovertible evidence of grave financial inequities promoted by investment banks, treasuries, incumbent investors, and multi-lateral ‘development’ agencies have uniformly defended the abusers as a surrogate for not desiring reproach for ill-advised decisions.

“We’re already a long way down the road,” was a statement uttered recently by a head-of-state when confronted with a means to realign his people’s interests and benefit with their national resources. And, when pressed on public statements in which the same leader had stated that no decisions had been taken on resource development, the instant I recalled recent events which would suggest otherwise, his ire was raised as he knew that his indiscretions and misleading public statements were both knowable and known. “We know that your approach would have a good shot at stabilizing U.S. and European banks but it would require transparency that would not be accepted by corporations at this time,” was the response from a G-8 member. Lavish trade missions to Hong Kong, Macau, and Beijing for Pacific Islanders, African delegations and the U.S. Treasury and Federal Reserve. Goldman Sachs’ arranging for scholarships to prestigious universities and lucrative internships for the progeny of ministers and elected officials all reek of influence peddling – to say nothing of violations of Foreign Corrupt Practices Act violations in the case of U.S. entities. Promises of economic benefit and equity through shell corporations with neither governance control nor direct participation in cash flows. And, to add insult to injury, these illiquid equity interests are financed by allowing national treasuries to purchase their equity through operator-financed debt meaning that, in addition to gaining no economic value, countries are setting a certain course for bankruptcy and social reprisals – including high probabilities of civil violence.

If the risk of civil unrest was merely a theoretical abstraction in some far off land of disembodied despotism, one could almost understand a leader viewing self-interest expediency as an acceptable risk. But, what seems irrational is the fact that in every instance to which I have been privy, within the past few decades and in the adult memory of the leaders, civilian casualties have been the consequence of duly authorized, unconsidered, asymmetric excess. In many instances, the respective leaders who have defended the pillaging of their citizens’ futures have been buttressed with accolades on the international stage where multi-lateral agencies laud their emergence into the club of economic elites. It’s betting on the Titanic’s unsinkability AFTER the iceberg has rent open the hull. Could it be anything but greed-fed madness?

It was at a most recent meeting that I finally saw another explanation. More accurately, I heard it. “I can’t believe that a corporation would actually lie to a government to steal its national resources and destabilize a country,” a President said. “Great,” I replied, “I would hope that you don’t ‘believe’ anything I’m saying.” Recoiling from my unexpected reply, a bizarre window of truth emerged, his voice raising, “Well, why the hell are you wasting my time if you’re not wanting me to believe in you?”

And there it was. The real desperation. In a world filled with the certainty of oppression and wealth asymmetry, what was really lacking was not a genuine desire to democratically lead his people. No, what was really missing was evidence that an alternative could exist. I might as well have been standing before the Inquisitor suggesting that the Earth was merely a galactic dust particle in the expanse of infinite space, for my proposal and his response had nothing to do with observed fact and experienced reality. The objection was anchored in ‘illusory certainty’ that comes from ‘belief’.

The fact that an U.S. investment bank arranged for the country of Mongolia to indebt itself well beyond the country’s fiscal capacity while providing neither liquidity to service the debt nor any governance sufficient to insure expatriate management accountability is incontrovertible. The fact that the Federal Reserve and the U.S. Treasury have felt obliged to rename a Ponzi-scheme ‘Quantitative Easing’ is equally incontrovertible. The fact that the Chinese government sought to build an asset backed reserve based on the collapse of fiscal accountability in the U.S. government resulting in their massive resource imperialistic hegemonic drive has already been consummated. With energy and mineral asset deals negotiated in Iraq, Iran, and Afghanistan while their U.S. debt investments finance the United States’ loss of money, troops and integrity, one can easily observe that their calculus driving wealth transfer is both elementary and self-evident. If you stand at a vantage point of sufficient dispassion to observe what is, you can readily apprehend that desperation for an alternative narrative is fueling the paralysis of leaders across the globe.

Against this backdrop, one could find ample cause for seemingly rational despair. Will informed citizens rise up and, once again, return to violent revolt when faced with the failure of leadership that they’ll lay at the feet of their officials? Probably. Will such responses have equal consequence to all of the actual perpetrators? Definitely not. Regrettably, when lashing out against corruption, the easy target is the local leadership. But they were unlikely the sole responsible party. While international agencies point to corruption in countries across the globe as a scourge, what’s missing is the equivalent transparency on the companies, development agencies, and individuals who facilitated the same.

With a relentless commitment to effectuating alternative narratives based on actual experience, we can rise above vindictive responses and start demonstrating a more desirable condition. Remember it was the returning sails on the horizon which shook Spain, Portugal and the balance of power in Europe, not the impassioned pleas of an idealist navigator seeking funding.

So here’s an idea. Yesterday, Larry and I stood with community leaders on a hilltop just to the northeast of the airport in Port Moresby, Papua New Guinea. (By the way, PNG’s head of state is in the hospital in Singapore for those of you trying to guess who the identities are referenced above, so it wasn’t him, and it wasn’t PNG in my reference.) In an area of approximately 400 acres, 3,000 families are being moved into a model relocation village. The sweeping grasslands hide rocky clay that is not the rich volcanic soil of the New Guinea islands. However, adequate gardens are being planted and the place affords peace and tranquility not found in the choking settlements around the capital. The place is blessed with perpetual 10 – 15 knot winds, ample trees and undulating hills.

The only thing missing is a reliable water supply. A few windmills and a few wells would be sufficient to fill a gravity water tank that could be used to create a micro-utility. This public utility could be owned by the community and, once established, serve as a reliable micro business selling clean water at rates more affordable (and service more reliable) than the distant municipal supply. With a modicum of effort, local community members could meet their water and energy needs with the natural abundance of wind, light, and materials for suitably scaled propellers to supply water and electricity for lighting. Within the readership of InvertedAlchemy, there are enough people who could value seeing 3,000 families with fresh water that we could partner with the village and launch a partnership. Into it we could contribute technology, knowledge, engineering expertise, money, and time. From it we could receive custom & culture, knowledge, engineering expertise, money and well-being. Most of all, we could demonstrate that another path, one free from resource and power asymmetries, can blossom and flourish in a place where such an experience is not anticipated.

After all, if we are going to start addressing the systemic reflex of ‘disbelief’ we need to find ourselves in constant action. As long as we’re debating the lofty ideals of a more conscious humanity rather than knowing that we’ve actually tipped the balance in our present activities, we’re providing sanctuary to the malignancy that leads to persistent abuse. A cup of clean water sourced from a community-held utility indicts faith, belief, and ephemeral ideals. Whether it’s clean water for a settlement in Port Moresby or a community response obviating the illiquid obligations of the insolvent Medicare and Medicaid, which vie for the collapse of the U.S. economy, it is our actions which are called for, not beliefs. So, walk over to your sink, fridge, or water-cooler and ask yourself, “Would I like to share this experience with a stranger?” If you would, I’ve got a spot on Elder’s Hill waiting for you.

The Apocalypse Comes on Public Transportation

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On May 18, 2011 – just three short days before the Family Radio predicted rapture – a man and a white horse tried to board the 7:02pm service from Wrexham to Holyhead in the United Kingdom. You know, when you’re predicting the end of times from a mathematical formula derived from Noah’s flood, the Garden of Eden, and inspired texts (I reserve judgment on what precisely was the inspiration), and donor inflated prophetic delusions, forecasting the arrival of a Horseman of the Apocalypse and being off by about 3 days isn’t bad. Adjusting for leap years, the Gregorian calendar misprints, and obfuscated Papal Bulls, the only surprise is that the End of Times would come on UK public transportation. Then again, why not? If you’ve ever used public transportation in the UK, you’ve probably felt moments when the notion of hell and purgatory are quite real and possibly already upon us.

So, as the hours ticked on, I was particularly astute to pick up any subtle alterations indicative of the rapture. Different color sunrises, animal behavioral changes, you know the drill. On the 21st of May, to be clear, the world changed. The sky above the Rotunda at Monticello was bluer than I’ve ever seen it. Great visibility for inbound angels or outbound souls. The temperature was downright heavenly. And, without question, there were some ominous signs. The koi in my fish pond seemed to crawl half way out of the water to reach for the food that was in abundance on the ground surrounding the pond leading me to wonder if they’d be on at least four legs by the end of the End of Times at 6pm. Earthquakes happened – but then, again, they have been seeming to do that a lot lately. Martin Parkinson, Australia’s Treasury Secretary, exhibited the unbelievable candor of criticizing his PhD advisor Ben Bernanke’s departure from their co-authored paper published in 1990. And at the Preakness – after all, if you’re looking for an Apocalypse, what better a place to do so than at a horse race – Astrology came in third! Take that all you heathens! Shackleford was the Triple Crown spoiler and, as you all know, Shacklefords came from the “cradle of Christianity” (Northumberland, UK) known to be the centre of the Church’s greatest adherents back in the day. So there we have it. The UK, Shackleford, a white horse on a train… do you need any more convincing?

And, as you can see from this blog post, I made it. I’m writing to all of you from ‘the other side’. I am assuming, unless I hear otherwise, that I am know in the ‘after-life’ and, having awoken to another glorious day – sunny, fish still trying to walk, my lovely family being lovely – I’m pleased to report that the hereafter is remarkably similar to the here before. I feel a bit nicer. It seems that I’m a touch more tolerant. I don’t know but I think that the soft pretzels I made taste a little, I don’t know, softer or more pretzely. See, I can even make up words that you understand from the other side.

May 21 was a great day for a bunch of reasons. All of them had to do with the people with whom I spent the day. I had some of my dear family from South India in the house and we laughed, ate, and enjoyed life. I had Colleen, Katie, Zach and April around – making for a delightful family affair. Scooby was as affable and lazy as ever. I got to skype with some of my friends in Papua New Guinea. Yes, in fact, May 21 was a remarkable, transformative day. But most of all, the 21st was great because it let me reflect on the notion of an apocalypse.

You see, here’s my beef with world-enders and those pre-disposed to drink from their Kool-Aid chalices. I think that the notion of the giant reset button in the sky is an enemy of accountability. I think that if you actually have room in your head for the just-around-the-corner fire of destruction or eternal bliss, you’ll actually be far less motivated to make a difference with what you’re encountering today. By holding a plausible option that you really don’t have to concern yourself with, say, 1,000 year consequences for your actions because the world’s going to be toasted by some remote, vindictive recluse who is seriously angry with his own creation, you run the risk of exculpating yourself and others from actions which should be considered. Whether there is an existential hereafter or not is not the point. The point is what you do with the present. Are you showing up and making a difference in the lives you touch or in the places where you can affect consequence? If yes, tomorrow will be as rewarding as yesterday and you’ll have neither the time nor the motivation to obsess about some temporally defined shift, up, down or out. If no, May 21 will be the End of Time to make a difference that day and if you don’t wake up and show up, you’ll blow another day on the 22nd, 23rd, etc…

And, after you unwind the comedy and the irony of Family Radio’s fantasy, you see that the great tragedy is the hundreds of thousands – possibly millions – of people who, deluded by empiricism stacked on myth, chose to escape rather than engage. Whether it’s the advertisers who paid for the billboards, the vans guzzling gas up and down interstates, the pamphlets and brochures screaming out the warning of the End, or whether it’s the purveyors of fear who prey on the same fatalism to erode citizens’ confidence to create a ‘More Perfect Union’, the apocalyptic myth is destructive. The dissociation of people from consequence – temporally, spatially, or metaphysically – is a utility wielded by those who seek to manipulate and control. The sooner people of conscience and consciousness engage free from such influence, the sooner we’ll have a bit more bliss on Earth.

Happy tomorrow! Do something to celebrate being human, again.

State Coherence and Dissonance: Part 3 of 3

You have to give them credit for creativity, nefarious though it may be. When Monsanto realized it was riding glyphosate (more commonly known as the weedkiller, RoundUp®) into a patent sunset, it changed the game. Rather than suffering the fate of pharmaceutical companies who, at the end of a patented drug watch generics gobble up market-share, Monsanto decided to out-fox the social contract of ‘acceptable’ market incentives for effective monopolies. Using their quasi-monopoly on seed which had been genetically modified to resist RoundUp®, they began entering into contracts with growers which prevented farms from storing or replanting seed. In addition, under perpetual contracts, they rendered pollination by bees, wind or any other natural cause a crime and, in so doing, enslaved farmers in industrialized and marginalized countries alike. In a brilliant, albeit possibly unconstitutional sweep, Monsanto insured Phase Coherence (the ever-greening of their monopoly) by creating State Dissonance (changing their market control strategy from chemical patent to seed supply contracts). In doing this, they insured that they would continue to use an ever-greening contract strategy to support their incumbency on herbicide use (State Coherence) – contributing to countless, unquantified long-term environmental and soil degradation risks – and, at the same time, disrupt the economic and social evolution of agribusiness by effectively outlawing natural pollination through their cunning use of contracts. And, by the way, all this was done with the explicit endorsement and enforcement of the WTO, the U.S. government and the World Intellectual Property Organization’s industrial cabal in Geneva under the guise of ‘promoting’ innovation.

The most common form of State Dissonance is money. Money – in the form of promissory notes – is an explicit means of disintermediating trusted relationships. When I purchase something with money, I am saying that, for the consideration given, my relationship with you is over; my obligations to you are fully defeased. And in accepting money, the receiving party is equally divorcing any future obligation with a finality that says you have given all the consideration you need. Economists and social scientists alike have argued that this disintermediation is necessary because material, energy, or event State exchanges are inefficient. However, none of them have been able to address the erosion of community accountability and social values of citizenry impacted by this consensus behavior.

Say I have a gold mine. And, say, I want a chicken that you have so that I can have eggs every morning before I go to my gold mine. I could give you some gold in exchange for your chicken. But, if you didn’t have anything to do with the gold and you didn’t really care for gold, then we would potentially reach an impasse. I want something you have but all I have is something you don’t want. As a result, I have no means of engagement, the argument goes. So, the simplistic, linear, unimaginative mind concludes, ‘We must have a neutral surrogate (money) – which has no intrinsic value whatsoever – so that we both engage an exchange with efficiency.’

What I find most fascinating about the animation of a surrogate – in this case money – is that, we decouple things that we respectively do value and subordinate it to something with explicitly no value. And that’s deemed efficient.

Now remember, this ‘efficiency’ came from somewhere. And that somewhere was an unholy alliance between hierarchy and religion. The neutral surrogate of currency or promissory notes did not appear ex nihilo. No, it appeared for the purpose of financing conquests of the physical and the spiritual realm. And, quite conveniently, it became an efficient tool to use in the creation of taxation – an inefficiency imposed by hierarchy for disintermediation of social values like law & order, defense, and social security.

State Coherence is a condition in which matter, energy, or experience require no transformation for their utility or manifestation to achieve its purpose. In Part 1, we discussed the coconut which, at one point is calories for food, at one point is caloric heat for cooking, and at one point is fertilizer for, you guessed it, another coconut. When I need to move water to a field, I can place a wheel or turbine in the river and, using State Coherence, I can have the water move the water. If I wish to have fresh water on the coast of East New Britain in Papua New Guinea, I can use cold sea water passing through coils to condense water vapor from solar copra driers thereby collecting distilled, fresh water using cold salt water as my extraction medium.

I am intrigued by the number of environmental activists who run around the world in airplanes to whip out their laptops or iThingy's to project screen-fulls of information about what’s wrong with extractive industries. The State Dissonance of this behavior is deafening. What you’re telling me is that you will use Jet-A (jet fuel) which was pumped from the ground, refined at least 3 times; you will write your screed on your conflict metals-filled device; you will use electricity to project a gazillion watt bulb onto a synthetic screen; and, you’ll do all this to tell me that extractive industries are bad? I’m sorry, I was drowning in the State Dissonance hypocrisy so thoroughly I must have missed something.

One of the reasons we use Integral Accounting in our business and community ventures is because it provides a framework to understand State conditions. When I consider Commodity, for example, I find myself looking at all of the matter, energy or experience which exists in an ecosystem and, by explicitly identifying it, I consider what can be repurposed within State Coherence without requiring any State alteration. For example, if I want to start a not-for-profit activity and I know that to do that from scratch would require legal expenses, time, and custom and culture awareness; I can find existing, aligned or under-utilized non-profits and use them as a commodity by aligning my purpose with theirs. In this way, an artifact of Custom & Culture (in this example, a non-profit corporation), because of its presence in my ecosystem can be viewed and used as a Commodity and can obviate my need for two State creations (the definition of activities in Custom & Culture and the expenses – money – associated with the establishment thereof). By appreciating the State condition in which matter, energy or experience exists in my observation, I can strive to minimize the need to pass States through value surrogates thereby increasing efficiency and decreasing the need for intermediaries.

In a recent conversation with university students I was discussing the notion of entrepreneurship and was intrigued by the creativity each manifest in their ideas of how to build commercial and social endeavors. However, what was profoundly disturbing was the fact that not one of them had even contemplated the compulsive impulse for: a) the formation of a company; or, b) the financing of the same with monetary capital. Asked whether any considered using partnerships with affiliated, established organizations or assessing redundant resource capacity (office space, computers, sales networks, etc) of third parties to accelerate their efforts and minimize their novice risk, not one had done so. In other words, while creative in one dimension of State condition, no awareness was evidenced or even contemplated to evaluate the complete State ecosystem. While policy makers around the world lament the failure of ‘small business’, what none of them seem to consider is that what failed was never a business – merely in impulse starved from a sustaining ecosystem.

The more refinement or utility demand required to take matter, energy or experience from its native condition to the utilitarian purpose, the greater the State Dissonance. The more dependencies are implicit or explicit in the process thereof, the greater Phase Dissonance is either present (or at least latent) in the system.

Here in Charlottesville, famed architect school dean turned resource utilization pioneer Bill McDonough popularized the ‘cradle-to-cradle’ concept in everything from habitation to transport. Our work on State Coherence optimization – while fully embracing McDonough’s principles – encourages the extension of the concept into Phase State Coherence in which an ideal is the State Coherence persistence across multiple Phase applications. In its most crude form, a rock, remaining a rock, serves as paper weight, door-stop, counter-balance and river-crossing where Phase-inspired context is the only required alteration.

At the heart of Phase State consciousness, we see the value in intentional and explicit consideration of Phase and State where we can maximize utility while minimizing dissonance created by exchanges or transitive impulses which require surrogacy, intermediation, or consumption solely for the purpose of Phase or State alteration. Every kilowatt thought to be required to light a room or produce aluminum is considered and utilized only when such consumption is the only viable means of achieving an outcome. Every climate change conference agrees to select locations based on the minimum travel required to assemble people under shade of trees rather than air-conditioned conference centers in hot tropical resorts. Each public procurement begins by mandatory inclusion of public domain solutions wherever they already exist rather than paying proprietary premiums for faux innovation generated by willfully ignorant purveyors.

Should you or your organization wish to do so, our team has been working with a number of organizations to learn and experience the process of Phase and State consciousness. We’d be delighted to have you join us in this journey towards more constructive and harmonious endeavors.

Phasing Out – Phasing In – Phase Coherence and Dissonance: Part 2 of 3

During a presentation made by an Indian economist at a World Bank conference at PSG Technical College in Coimbatore, I did a double take when I heard reference made to the “mature call center industry” being on the wane in India. “Mature?” I thought. “How can anyone use that adjective for something barely a decade old?”

In Korea and Taiwan, semiconductor fabrication facilities took longer to build than the production cycle of products into which the devices would go. Singapore lured dozens of multi-nationals to the island nation with financial incentives only to find that Vietnam, Thailand and others offered skilled labor at a fraction of the price of Singapore’s citizens. Kodak famously bet its future on a phasing out of film and lost its legacy market dominance to digital five years sooner than the film obsolescence was predicted. GE was sure that technology transfer to India and China would be great for propping up sagging North American revenue but failed to anticipate the diaspora of engineers who were prepared to obsolete Connecticut-inspired innovation at a rate twice as fast as its own development cycles. Countless pension fund managers swooned with the promise of “fixed income-like” products – CDOs and CMOs – which promised great returns only to find themselves fleeced by the very investment bankers who pitched the sales (propped up by Rating Agency collusion) as investment grade. “Green” investors flocked to invest in carbon alternative energy ventures paying no attention to the infrastructure bond maturities which made grid-dependence an insurmountable obstacle for the adoption of new technologies.

When we think about Phase Coherence or Dissonance, it is important to realize that our present view of time has served us poorly. We are bombarded with “Breaking News” about a second kiss, the bombing of Tripoli, and a drunken celebrity ranting about his producer. In our careless intoxication with the immediate, we have lost all frame of reference for the consequence of the collective ‘field effect’ of inter-related – though possibly uncorrelated – events. When I was invited to provide some advice to the Japanese government at the request of the late Naoyoshi Suzuki and my friend, Norio Nakahara, I was gob-smacked when I heard them talk about the Japanese 100-year plan. Few Western politicians or strategists can comprehend the Chinese central government’s 5-year plans. We want quarterly financials, up-to-the-second stock quotes, real-time crawl on the bottom of our always-on TVs and PDAs. However, if one reflects at all, one realizes that we don’t see interconnected Phases – merely staccato, disjointed artifacts. I am humbled by my friends in Papua New Guinea who discuss time in thousand year memories and thousand year futures.

For an economy to optimally function, Phase serves as a critical, yet neglected dynamic. As I discussed in Part 1, the principle captures dynamism and consequence – not merely linear time nor punctuated periodicity. The absence of its recognition can be seen in 24-hours talking head causality banter. The markets rose on unemployment numbers. The markets fell on earnings which exceed analyst expectations. The markets couldn’t figure out what the hell the Fed was trying to do so they went…. you get the point. When you stand back from simplistic time dependent correlation and causation, you find that none of our present accounting, rating, trading, or reporting principles serve anything other than emotional reflexive behavior. Regrettably, this collective blindness fails to detect systemic risk or opportunity.

Phase, in my experience, is indecipherable without the capacity to observe systems from multiple perspectives. One cannot apprehend orthogonal convergence unless diverse, uncorrelated inputs are equally procured and valued. When Cisco was executing its acquisition frenzy a decade ago, it failed to understand interdependencies which, post-acquisition, would either cost multiples more to address or render the acquired company or technology useless. During the first three years of this millennium, we tracked over $1 trillion in write-offs of acquisitions where buyer’s remorse found it had overpaid for what was immature, obsolete or incomplete.

And this is not just a high-tech blindness. The central regions of Mongolia have fertile agriculture potential including vast tracks suited for the growth of potatoes. Devoid of the occupying Soviet central procurement aberration, over-production leads to episodic price suppression followed by post-consumption import requirements from neighboring China. Farmers, borrowing money from lenders for seed stock, become indebted at the beginning of the season and high rates of interest accrue until harvest. Without means of smoothing out crop distribution (like having cold storage for inventory preservation and phased sales), they are forced to sell en masse driving price and profit down. So, at the very pinnacle of commercial success, profitably is squeezed and debt-dependency is reinforced. With little gain left from a growing season, costly Chinese imports extract a toll which forces the farmer into indebtedness the following year. Tragically, this story is played out around the world. From the ancient story of Joseph stewarding the Pharaoh’s commodities in Egypt, we know that food storage and inventory management is central to wealth creation but, Phase blindness reinforces debt cycles which could be easily broken with rudimentary cold storage.

Governments around the world persistently engage in Phase Dissonance with public procurement. Military procurement routinely involves the acquisition of technologies in which the contracted deliverable is obsoleted or counter-measured before contract maturity. Municipalities use their credit-ratings to support public bonds for projects which have neither correlation to the implementation duration or the revenue derived from the project. Congresses, Parliaments, and Presidents alike most often budget and forecast financial performance with maturities incongruous with election cycles and, as a result, are correctly seen as charlatans rather than public servants. Infrastructure projects are budgeted and contracted without any visibility as to the innovation or obsolescence periods of the components and the public winds up paying multiples of budgeted projections in the form of ‘change orders’.

So what does Phase Consciousness look like?

In its most simple form, it looks like the formation of Rabobank – one of the great Phase Conscious historical successes. A bank started by and for the cooperative interests of grain growers and bakers, Rabobank’s roots came from financing the coherence of production cycles – both those of grain and those of bread-makers. By linking these interests in explicit interdependence, the bank became one of the world’s most well-capitalized and respected modern banks.

In another form, it looks like Sovereign Technology Credit Obligations. STCOs are financial instruments in which a company, municipality, or government can purchase a project and finance the component integration in synchronization with that component’s utility. By identifying all present suppliers and all parties innovating potentially obsolescing options, the buyer can invest in future innovation with money that would have been wasted on antiquated components or costly overruns.

In every instance, Phase Coherence serves to align value exchanges with underlying productivity or utility. Small-scale, distributed power is not promised immediately following a publicly financed 20 year bond issued for a central grid system. Pension funds are not put into speculative equities where maturities have no established basis. Corporations and municipalities resist the urge to raid pensions for short-term, politicized activities at the certain expense of the very constituency they seek to appease.

Now here’s the secret to the apparent prescience of this blog. The reason why I was able to identify the illiquidity of the FDIC and PBGC over 6-months prior to any media or economist reports was because I study Phase Coherence and Dissonance. The reason why we knew 2008 was what it would be as early as 1999 in a presentation to the Richmond Federal Reserve was because we observed incongruous short duration financial instruments wrapped into long duration instruments with long-established, uncorrelated default and insolvency profiles. The reason why we knew that business process outsourcing was going to irreparably harm many U.S. businesses is because we tracked university graduates returning to China, India, Korea, Taiwan and Vietnam for over 15 years before Jack Welch decided American innovation could never be challenged.

Phase Coherence exists when the magnitude, period, impulse or field effect of an action or effort aligns with the expectations built and performance manifest, around the value exchange between participants in the ecosystem participating therein. Phase Dissonance exists when asymmetries are formed in scalar misalignments which are opaque – either willfully or inadvertently – to one or more participants. The greater the Phase Coherence, in most instances, the more disintermediated are surrogates – both people and value intermediaries and currencies – as the absence of inefficiency derived deferral does not foster opportunities for mistrust and performance latencies. Phase Dissonance animates debt (derived from the Latin root for ‘one who owes’) while Phase Coherence animates credit (derived from the Latin for ‘one who trusts’). ‘Too good to be true,’ is an intuition of Phase Dissonance. ‘Beyond my wildest expectations,’ is a manifestation of Phase Coherence.

Take another look.

Phase and State Coherence - Part 1 of 3

Note: Regular readers will note that I did not post on April 24. My lovely bride surprised me with a birthday trip to St. Martin and I connected to abundant nature rather than the net. I trust this post was worth the wait. If not, take a vacation to St. Martin and it will make more sense.


Should you wish to have your cognitive boundaries stretched, read Joseph Jaworski’s Synchronicity, Karl Popper’s The Open Society and Its Enemies, and Jared Diamond’s Collapse in the space of a month on the shores of three different oceans separated by at least one transit of the dateline. Immersed, as you would be, in consciousness and nature, the works take on dimensions that remain illusive if absorbed in an armchair sipping a beverage. In each of these works, you see the effort of diplomats – emissaries from both the prophetic and the prosaic – who passionately seek to awaken humanity from narratives of obsolescence, self-destruction, and shared epochal tragedy to illumine a possibility for a more suitable humanity. Along with my most recommended of authors – Gregory Bateson – they attempt to navigate dimensions of inquiry with words which belie the vision they seek to describe. Each one seeks the elixir of essence through the coarseness of language constrained by archetypal metaphor.

I am embarking on an expedition of sorts in this, the first of a series of three posts. Unlike the Homeric tomes referenced above, I will, in brevity, seek to convey essence which I have come to understand as an imperative in the understanding of our economic frameworks but, which through careless neglect, is passed over unconsidered. It is not accidental that most deist traditions include in scripture the prohibition of graven images. Divinity instructed that essence, not artifact, should be the object of veneration. It is also without puzzle that the epic of spiritual traditions involved journeys – not stasis. For it is in the physical and temporal transience that revelation can evoke clarity of purpose unimpeded by monochromatic redundancy. So too, we need to understand that in economies (remember the etymology of the Greek word meaning “management of the household”), it is in the journey through exchanges that value is manifest. In our insular view of post-Modern consumerism, we have lost the recognition that hording – an artifact of fear and mistrust – shares no association with wealth. Wealth, in its ideal form, is the capacity to engage fully without limitation, not the capacity to survive an uncertain (and feared) future.

Upon this canvas I would like to explore the concepts of Phase and State Coherence and Dissonance and the role these dynamics play in the understanding of value exchange. Notwithstanding the limitations of language mentioned above, I have chosen these terms as I see them representing a dynamism which is lacking from many of our economic nomenclature. Let me simply introduce what I mean by each of these and, in the weeks to come, I will attend to a deeper explanation of both in a variety of contextual frameworks.

Phase – the period or pulse (measured in time, magnitude, or field effect) in which essence and value are manifest, recognized, transacted, utilized, exchanged, and retired or unseated. This concept incorporates principles such as invention, innovation, incrementalism, obsolescence, duration, maturity, and life-cycle but transcends them in that Phase is perceived through cycles and consequence in totality – not in punctuated episodes.

State – the form (measured in commodity, custom & culture, knowledge, money, technology, well-being) in which community consensus coalesces to denominate a manifestation of matter, energy, surrogation or experience. This concept includes science, mathematics, social order and convention but transcends them in that State incorporates the unconstrained completeness of matter, energy, or experience.

Coherence – expressions in which amplification, propagation, transfer and transcendence are complimentary, promote efficiency, and optimize common access.

Dissonance – expressions in which interference and friction impede or restrict propagation, promote discord or obfuscation, and thwart transfer.

To understand these concepts in a practical application, let me explore a few examples and remind you of some earlier references to these principles.

When one prepares an umu in Samoa (a cooking method in which food is prepared on the ground with heated stones covered by leaves), one of the dishes which may be included is palusami (a dish that puts creamed spinach to shame). This mix of taro greens, coconut milk and salt is prepared in large waxy leaves and placed in the umu. The cooking stones are heated with a fire made from the coconut husk and leaves from previous umus. The State condition is that the whole of the coconut and the taro are used – in an unaltered state – to supply nutrition. The “waste” – in an unaltered state – is used for fuel to heat the cooking stones. The Phase involves a complete first use (food), second use (fuel), third use (ash to the garden) engagement of every State (coconut and taro). In this example, we find Phase / State Coherence as there is no point in the process where the State of a thing requires alteration and, save the caloric input of manual labor to collect, prepare and consume the food, the system achieves its utility without significant alteration. A State change occurs to the coconut husk at its burning, but is harvested for a Phase utility – the heating of stones. This example serves as a representation of an efficient value exchange with high coherence.

When, incentivized by Federal tax policy reinforcing the centrality of home (real estate) indebtedness as a means of serving innumerable purposes, the U.S. government encouraged patriotic consumption in the wake of the September 11, 2001 events, by inducing re-financing of home mortgages allowing them to serve as the ATM for stimulating consumer spending. Our economy didn’t grow. The illusion of perpetual asset value increase grew. The State of real estate did not alter. The Phase of indebtedness – that wonderful, insurance-driven actuarial 30-year intransigent fixture of Occidental finance – didn’t alter. But what did alter is the decoupling of actuarial assets – homes and real estate – to purchases of consumer goods and services. The Phase dissonance made the 2008 financial collapse perfectly predictable (as evidenced in my speeches in 2006) as the Phase of consumer credit operates in 3-5 year oscillation periods where, on the second attempt to prop up the illusion, the absence of assets becomes visible and, voila, the market fails. In short, the economic policy of the G-7 was to seek to create State dissonance (use real estate to prop up consumer spending) by forcing – albeit unconsidered by most economists due to professional courtesy and wholesale irresponsibility – Phase dissonance (attempting to blend 3-5 year duration risk with uncorrelated 30 year duration risk). In this instance, the combined Phase / State dissonance led to collapse and, to this day, no substantive policy or regulatory change has been possible as, to date, no one still is paying attention to the systemic dissonance.

CNN recoiled with the breaking news today that gasoline prices were crossing a $5.00 per gallon price. Economists quoted in the Wall Street Journal and Financial Times all talked about the effect of high energy prices on slowing consumer spending. Somehow missing from all these conversations is the Phase / State coherence of what’s driving gasoline prices. We know that states are all suffering economic shortfalls and we know that approving taxes has become taboo in Washington courtesy of the pro-limited government conservativism of tea party elephants (the same ones who spent like drunken sailors the last time they controlled the purse). The collusion between the oil industry and the government is a wonderful example of Phase / State coherence. States derive significant benefit from taxes levied on fuel. Many states collect revenue as a percentage of the price of fuel. Not surprisingly, states with the most bleak economic conditions represent a disproportionate number of those who also tax gasoline at high percentages. So, using State Coherence, the gasoline price is encouraged to spike in Phase with the revenue benefit to the state. While we may find this Phase / State coherence reprehensible (or, God-forbid, collusive), one thing is certain. We are having taxation incented energy price spikes where NO external Phase or State condition warrants the spike. And the reason why we won’t have anti-trust oversight on this (notwithstanding President Obama’s Facebook appearance where he wanted to ‘connect’ with real people), is that the State Attorneys General who would need to launch such an inquiry draw their salaries from – you guessed it – the racketeers.

We will explore, in the coming two weeks, a deeper discussion of Phase and State coherence. We will look at how, by viewing economic and social systems through these lenses, we can unravel inefficiencies and willful incumbent power systems which, when exposed, allow us to consider alternative forms of engagement.